Sanctions and Alternate Markets

Abstract

Although much research has examined how third parties might affect the success of economic sanctions, scant research has considered the extent to which potential—rather than realized—alternate markets affect strategic behavior between sanctioning (sender) and target states prior to sanction use. We argue that the sender is more likely to threaten or impose sanctions against a potential target with higher trade dependence on the sender, but only under the condition that the target’s ability to redirect lost trade to third parties is low. As the target’s ability to redirect lost trade increases, the sender is less likely to use sanctions because it expects that the target could mitigate the intended costs of the coercion more easily. We capture potential alternate markets using a measure of the total economic capabilities held by the target’s allies, finding support for our expectations in statistical tests using data on U.S. sanctions spanning 1950 to 2005. Our results affirm the importance of accounting for third parties and alternate markets as factors influencing the strategic behavior associated with the use of economic coercion.